Children and young people financial capability deep dive: parenting

• Context
• The study
• Key findings
• Points to consider

Context

The chances of children and young people having good financial capability later in life are affected by their experiences and the lessons they learn about money in their formative years. While it is clear that parents and carers are central to the formation of these ideas, less is understood about the nature of their influence. Financial capability in adults is evidenced by using skills, knowledge, motivation and attitudes to make good financial decisions and develop financial wellbeing. These financial capability behaviours develop gradually throughout childhood and adolescence.

The study

The study examines the results of the Money Advice Service’s Children and Young People Financial Capability Survey (2016). The study explores the links between parental financial capability, attitudes and behaviours in terms of how they introduce the use of money to their children, as well as their children’s financial capability. The survey was designed to better understand the financial capability of children aged 4-17 years in the UK. While 4,958 children and a parent or carer for each child were surveyed, this study focuses on the cohort of children aged 7–17 years.

The research analyses the following elements of children’s financial capability:

• Ability: financial knowledge and skills.
• Mindset: values and attitudes towards money.
• Connection: engagement with money and access to financial products and services.
• Behaviour: use of money.

The study also explores the following elements of parents’ behaviour and attitudes, which may influence their children’s financial capability:

• Their own financial capability.
• How much financial responsibility they give to their children.
• Role modelling (discussing and demonstrating how to use money).
• Attitudes towards teaching children about money, such as their views on the age appropriateness of introducing different financial topics.

The study compares the financial capability outcomes of children aged 7-17 years, whose parents reported certain behaviours or attitudes to those of children whose parents reported contrasting behaviours or attitudes. Results were tested for statistical significance. Logistic regression was used to explore the data, to determine whether significant differences remained between groups of children that are similar in other respects. If significant differences remained, this indicates a particular parental behaviour or attitude is likely to be a key variable explaining different financial capability levels.

Key findings

The study demonstrates a clear link between a child’s and their parents’ financial capability. It also shows that parents can take certain actions to promote better financial capability for their children.

Children with stronger financial capability tend to have parents who:

• Are more financially capable(being regular savers, able to pay unexpected bills, and confident money managers). This is most strongly linked to children’s Mindset and Behaviour (such as understanding the value of money and saving).
• Give them full (rather than partial) responsibility for saving and spending decisions. This is strongly associated with Mindset indicators and some Ability and Connection indicators (for example, being able to read a payslip and use a bank account).
  • The study found a small number of negative relationships around children who were given responsibility over spending decisions: they were less likely to save and more likely to spend, less likely to accept not getting things they want, and more likely to ask for things despite being told they cannot have them.
• Are confident role models: discussing money matters and regularly showing their children how to complete money-related tasks. The relationship is particularly strong around Mindset indicators (such as understanding the value of money).
• Set rules about money for their children. This is positively associated with Behaviour and Mindset indicators.

Links between child and parental financial capability are strongest for children aged 12–15 years.

Points to consider

Methodological limitations:

• The sample was weighted to be nationally representative of children aged 4-17 years, but is not necessarily representative of parents (for example, 71% of adult respondents were female). This could result in bias if the link between parental behaviour/attitude and a child’s financial capability differs for male and female parents.
• The study is based on parents’ reports of their own children’s ability in relation to a number of financial capability measures. This may not always provide an accurate description of ability.
• Breaking down respondents by children’s age groups did not provide sufficiently large samples to detect statistically significant relationships. The study is also confined to one occasion; it does not track individual development over time.

Relevance:

• The study findings fed into a gap analysis to inform MAS’s children and young people commissioning plan. The results are therefore of relevance to providers interested in developing financial capability initiatives working with parents and children.

Generalisability/ transferability:

• The findings could help develop targeted interventions, for parents struggling with finance in a variety of contexts, to improve their own financial capability, while also teaching their children about money.